Resizing the tax base. Tax loss. Limitation term of the right to establish tax claims

CONTENCIOS ADMINISTRATIV ŞI FISCAL

Abstract

The "time" of the taxation basis for the purposes of Article 23 para. (1) of the Code of Tax Procedure is the tax year in which the taxable profit is made; the peculiarity of the application of this principle in the present case is that the taxable profit was established for 2015, but the tax base that generated it includes the tax loss of the previous year, 2014. The tax authorities argue that since this tax loss is recovered in 2015, the statute of limitations for verifying it, i.e. the income and expenses that generated the loss, would run from the year following the year in which it is recovered, in this case from 1 January 2016.

However, this view does not correspond to the provisions of the tax code on the establishment of the tax base, Art. 19 para. (1) of the Tax Code with reference also to Art. 26 (1) of the Tax Code on the recovery of tax loss. Thus, from a combined interpretation of these texts it follows that, if the tax base includes the tax loss of the previous year/years, the verification of the tax base of the year for which the corporate income tax was calculated implies the verification of the income, expenses, non-taxable income, non-deductible expenses incurred in the tax year and the way of recovery of the tax loss, in order to verify the application of the rule provided for in Article 26(1) of the Tax Code. If the verification concerns the tax loss itself (and not only the method of its recovery), as is the case here, i.e. when the tax authority verifies the very elements which determined the tax loss (income and expenditure in the year in which it was recorded), then the limitation period for the latter verification runs from 1 January of the year following the year in which the tax base was established, i.e. the year in which the tax loss was recorded, in this case 2014.